The Central Bank has fined KBC Bank Ireland over €18.3m for its part in the industry-wide tracker mortgage scandal after the lender's “deeply unsatisfactory” response only served to increase the financial harm inflicted on customers.
Following the €21m fine imposed on Permanent TSB last year, the KBC fine is the second ruling following the regulator’s five-year tracker investigation into Irish mortgage lenders and other banks have set aside many millions for their anticipated fines.
KBC's part in the scandal involved overcharging 3,741 accounts and led to 66 customers losing their properties, including 11 homes, the Central Bank said.
“The impact of KBC’s actions on their customers was devastating and avoidable,” said the director of enforcement Seána Cunningham.
The fine was large in terms of the Belgian-owned KBC’s market share in Ireland, with the number of overcharged accounts across the industry running at around 40,000 accounts so far, said Padraic Kissane, the financial adviser who did much to uncover the scandal 11 years ago. Mr Kissane is now a member of the Irish Banking Culture Board which was set up to try to improve the conduct of the scandal-hit banking industry.
KBC had pushed back against the tracker investigation and caused more harm by insisting it had identified only 93 affected customers at one stage, and KBC’s resistance “was off the charts”, Mr Kissane said.
The cost of the scandal across the industry will reach €1.4bn, including the investigation, compensation to customers, and all fines, when the enforcement investigations into AIB, Bank of Ireland, and Ulster, are also completed, he said.
Mr Kissane also believes that in addition to the 40,000 identified accounts across all banks, that a further 2,000 to 3,000 people have “arguable cases” to be included in compensation programmes.
And the harm from the scandal is incalculable in terms of financial strain and broken relationships it has inflicted, he added.
AIB, Bank of Ireland, and Ulster Bank have put aside many millions to take account of anticipated Central Bank fines.
The Central Bank said KBC admitted to 12 breaches of its regulations. It said KBC “devised a strategy” in 2008 “to permanently” take some customers off low-yielding trackers, failed to inform customers, and gave “incorrect information” to the regulator 11 years ago.
"From the onset", it failed to act to protect customers when the Central Bank started its tracker investigation in late 2015.
“By overcharging customers over extended periods, KBC forced people into arrears, including certain customers whom KBC knew were already facing financial difficulties,” the Central Bank said.
The fine was reduced from an initial €26.1m.
Last year, KBC faced a furore after the top boss of its Belgian parent expressed impatience with the long-running Central Bank review.
KBC Group chief executive Johan Thijs said on a call to analysts the Central Bank needed to move on from its “annoying” inquiry. He subsequently apologised.